Vanguard Ultra-Short Treasury ETF

VGUS

Market cap $991M

Vanguard Ultra-Short Treasury ETF (VGUS) offers low-duration Treasury exposure with a competitive 0.07% expense ratio, a good way to avoid duration risks while collecting a yield. The duration risk primarily comes from the fact that shocks to inflation can be persistent, and cause inflation to anchor higher due to expectations effects. Time is the enemy of duration bets where higher inflation rates are at higher risk of becoming anchored the more time passes, and therefore requiring a more heavy reverse shock.

Dividend stocks and defensive sectors have dramatically outperformed as investors flee AI-vulnerable and AI-spending industries, but valuations now appear stretched. Consumer staples and energy sectors trade at historically high forward P/E multiples, often exceeding the S&P 500, despite lower long-term earnings growth prospects. Materials and industrials have also become extended, with valuations reflecting significant future earnings already priced in, especially given AI infrastructure spending.

Dividend stocks have sharply outperformed AI-related tech stocks since November 2025, reversing a multi-year trend. I see the rally in dividend ETFs like SCHD as overextended, prompting a pause in new purchases despite recent gains. AI is likely to benefit users more than makers, with sectors like banks, energy, and consumer staples positioned as early winners.

Vanguard Ultra-Short Treasury ETF offers a low-risk way to park cash, closely tracking short-term US Treasury yields with minimal duration risk. VGUS provides yields aligned with official rates, but currently offers little extra premium above the Interest on Reserve Balances (IORB) rate. The fund's monthly distributions may gradually decline if market expectations for rate cuts persist, reflecting limited carry opportunities in the current environment.

Warren Buffett's 90/10 portfolio - 90% in S&P 500, 10% in short-term government bonds - offers simplicity, low cost, and historically strong performance. The S&P 500's dominance is justified by its profitability, global revenue exposure, and long-term outperformance of most active funds, though it lacks small-cap and international diversification. Buffett's aggressive equity allocation suits his wife's likely large inheritance and goals, but may not be suitable for retirees with smaller nest eggs due to sequence of returns risk.

Jay Jacobs, BlackRock U.S. Head of Equity ETFs, and Roger Hallam, Vanguard global head of rates, share their outlooks for the rest of year, key trends to watch in the ETF space and the strategy behind their firms' latest funds with CNBC's Dominic Chu.

Roger Hallam, Vanguard global head of rates, sits down with CNBC's Dominic Chu to discuss the firm's new active ETFs launching this week, including its Vanguard Government Securities Active ETF. Hallam gets into the strategy behind the fund and why now is the time to go active.

The 10-Year Treasury yield signals that the market does not expect a recession in the near term. Current yield levels suggest inflation expectations remain elevated compared to recent years. Investors should interpret the bond market as pricing in persistent inflation rather than imminent economic contraction.

VGUS and VBIL are similar ETFs, but VGUS invests in up to 1-year treasuries, while VBIL focuses on 0-3 month treasuries. VGUS should theoretically outperform VBIL in a normal yield curve, but current market conditions and skewed demand for intermediate treasuries negate this advantage. The macroeconomic environment and geopolitical uncertainties are preventing yield curve normalization, making VGUS comparable to VBIL.

Investors understand idioms like “don't put all your eggs in one basket,” but what does that really mean when it comes to their investments? There has to be a better plan than going all or nothing in risky technology stocks or conservative utilities stocks.